I was lucky enough to recently attend the presentation of the Pritzker Prize in Architecture at the Rijksmuseum in Amsterdam. This year’s winner was Shigeru Ban, who is probably best known for his work in disaster relief using cheap materials like cardboard tubes. His do-it-yourself refugee shelters have been used in Japan, Turkey, and Rawanda. Check out his cardboard cathedral built after the earthquake in Christchurch, New Zealand.
Like so many places, as much as you read about it or as many pictures as you see, it’s never a substitute for being there and absorbing it, and China is no different. You notice the scale on your arrival, as after the longest taxi to the gate ever, we pull into gate 522 at Beijing International Airport, the world’s second busiest airport. The new, modern, architecturally impressive Terminal 3 alone is the third largest building in the world by area. We head out the first day to Tiananmen Square and the Forbidden City. What strikes me first is what a complete dichotomy it is. It’s early in the morning, and hundreds of people are already lined up at Mao’s memorial waiting to glimpse a look at his preserved corpse. In line, the younger Chinese wear Marilyn Monroe and Micky Mouse t-shirts (and, somewhat inexplicably, Life Cereal and Nestle “Chocalate Melk” shirts as well). The city is a blend of young and old, modern buildings and centuries-old palaces, and Western and non-Western culture.
Beijing is the political and cultural center of the country. It’s full of Chinese tourists who have made the trip to visit their nation’s capital just as we’d visit DC…think of the national mall but with 10 times as many people. We are a sight to be seen in Tiananmen. Almost immediately we notice people taking our pictures, though most surreptitiously. Some are more bold about it though: a guy took my picture with a SLR, equipped with what seemed like a foot-long lense, as I read my guidebook sitting in Tiananmen. The city is dense, but not like I’d expected—it’s a sprawling city of more than 20 million people and few really tall buildings (we’ll see plenty of those in Shanghai). The city seems to have no edge—it just expands. The streets are busy, often packed, but it’s not like other massive cities I’ve seen. It’s downright tame compared to the streets in Mumbai. Also unlike other cities I’ve visited, there is little visible poverty. Chicago has far more. Later in the trip, I think to myself, “Is this the trade-off between India and China? Democracy for food? Is this the trade-off, social liberties for the ‘iron rice bowl?'”
We spend the days hitting all the major attractions—the Summer Palace, Great Wall, Temple of Heaven, Forbidden City, and Olympic Park. We walk down the old “hutongs,” which translates to small streets or alleys, that are tree-lined and busy with small shops and houses. We check out the 798 Art District outside the city. Here among the factories used to build machinery and weapons in the 60s is a bustling art scene. It’s packed with galleries, cafes, and artists. The industrial buildings, some with slogans about Mao still written on them, create another dichotomy as artists with the courage to speak out, do. It’s one of the few places that addresses their history from 1912-1978, which it seems most would rather black out. It’s as if they have replaced their history with a simple icon—Mao—he’s every where.
We get around easily enough—the subway system is well marked and the overall the infrastructure some of the best in the world. It’s more modern then you’d think—BMWs and Audis on the street, high-end shops everywhere. Though there are many reminders of the Western world, outside of large Western hotels, no one speaks English. We have to present cards that state in Chinese that we are vegetarians to get food. We leave each day with the address of our destination written on a card in Chinese to hand the taxi driver like kindergartners on the first day of school. We hope it really says the right place—luckily, it always did. I can only describe traffic in China as a high-stakes game of chicken. Cars often drive between two lanes as they make up their mind where to go. On the way to the Great Wall, our driver passed on hills and curves, at one point bearing down on two women with strollers. If you are in the far right lane but want to be in the far left lane, you just go—you don’t signal, you don’t check your blind spot, you just go.
We pass the exit for “Future Technology City,” an entire city being built to compete with Silicon Valley, currently unoccupied. At times you look at the construction and can imagine an “asset clock” that moves dollar for dollar with the debt clock in NYC—you can feel the transfer of wealth moment by moment.
Leaving Beijing on Sunday night, we cover the 120 kilometers to Tianjin by high-speed rail in 30 minutes at a speed of 210 miles an hour. As you get miles outside the city, the industry starts. As far as you can see on both sides of the train, it’s warehouses, apartment buildings for labor, and smoke stacks. The buildings are built in groups of 3 or 5 at a time (4 would be unlucky). City blocks erected all at once stand empty, and there’s a constant haze over the city. The sky is gray, and the sun burns orange against it, creating the effect of a post-apocalyptic movie set.
Tianjin is in a race with Dalian to be the leading industrial city in China. It’s home to the new Airbus factory and many others. It’s growth is staggering—GDP growth this year in the city is 16.5%, and the massive modern convention center where the conference is located was built in less than 9 months. I’m in China to attend the World Economic Forum’s Meeting of the New Champions (Orwellian enough?), and the city is geared up for the conference—we’re escorted to and from the hotel with sirens, signs are everywhere, as are special sections in the paper and people in the streets waving to the buses of conference attendees. We speed by the Home Depot and Dior store on the way to the conference one day while passing a packed public bus, faces pushed against the glass. The side of the bus reads, “Feel delighted in public transportation.”
At the World Economic Forum, Wen Jiabo, the Chinese Premier, speaks the first night. He delivers a 45-minute speech focused on multinationals in China, economic growth, and their environmental efforts. The speech is packed full of stats—this is a man that has a deep understanding of economics and engineering. He started his career attending one of the best engineering schools in the country and working in hydropower. There are few sound bites—it’s a speech packed with data about long-term trends. It’s a speech you would not hear in America—it would be called boring, stiff, or wonkish. What it really is though is a plan based on data. It occurs to me that he really has one focus—running the country—and he goes about it as an engineer. There is no election cycle, no four-year turnover of government, no campaigning—just numbers and plans. That’s the thing—this is a country with a plan, several, in fact. They constantly cite their twelfth five-year plan. This is something you never hear here—we have no long-term plan for large parts of our economy and government. It’s counter to our political structure.
I start to see another side of the country as the week goes on. A student asks a minister on a panel in a full room about “two Chinas,” the rural one that looks like a frontier market and the cities, which are a developed market. He gets scolded by the minister: “There is one China, and that is an internal issue that we will deal with and solve. If you want to discuss, we can, but this is not an issue for the rest of the room.” There are lively debates about China and innovation—can they be innovative or should they be the manufacturers and systems engineers of the world? Has their history and political system dampened their ability to be entrepreneurs (personally, I don’t think it has)? You see the occasional soldier standing at attention in a corner of a parking lot with no one around. The smog is so bad one day, you can see it in the long halls of the convention center, and we’ve become used to constant mild headaches and sore throats. I plug in my laptop that night in the hotel and can’t log in to Facebook or Twitter. I Google “Tiananmen Square” and click on the Wikipedia entry to find that the site appears “to have been moved or the address is wrong.”
After an Italian dinner described as “an intimate encounter with Italian cuisine” featuring a “well-endowed” red wine (we see many amusing English signs throughout our trip), we try to depart Tianjin to Shanghai. We sit on the runway for two hours on a packed Air China flight because, as well as we can understand, there are birds on the runway. But after the two-hour wait and an hour-and-a-half flight, we reach Shanghai late in the evening. If Beijing is DC, Shanghai is Manhattan. The city glows with modern skyscrapers and billboards. The city’s growth has been staggering. One of the most interesting things we do in Shanghai is The Urban Planning Museum (seriously—I highly recommend it). It highlights the past and predicts the future for Shanghai. Most of the city was built basically in the last 30 years—the photos of the changes from the 1980s to today are mind-boggling. Shanghai is a microcosm of the rest of the country; its history is an expedited history of the rest of the country. It industrialized in 20-30 years…what took us over 100, by the way. We visit art museums and the famous Shanghai museum in People’s Park. People’s Park sits on what used to be a racetrack, which was closed when Mao came to power and decried as a symbol of Western decadence. We chuckle when we pass the Starbucks inside the park itself.
We attend the World Expo 2010 in Shanghai. It’s huge, like most anything else in China, and sprawls across both sides of the river. Some 200 countries are represented with different pavilions—part World’s Fair and part global chamber of commerce. We have passes to the China pavilion, bypassing the typical 6-8 hour wait to get in. The introductory video shows their history, starting with the ancient and through the emperors, quickly fast-forwarding to the reform and opening up of the 80s. There is no mention of Mao. It’s clear from the video the impact the Sichuan earthquake had on them—in a way, it’s their 9/11, a time for the nation to rally around a cause, and they are proud of their rescue and response efforts, which are featured predominantly in the film. The Expo is packed beyond belief; we hear that they’ve given out free passes to meet their attendance numbers. The architecture of the pavilions is awesome, and we spend the afternoon walking around and appreciating the pavilions’ exteriors, forgoing the 2-3-hour, sometimes up to 8, wait in line.
We walk the Bund, a river walk full of European buildings from the late 19th and early 20th centuries, on one side, looking across to Pudong, a modern architectural marvel, on the other. This is one of the neatest things in Shanghai—it’s full of influences from around the world. There’s the French Concession where we walk tiny alleyways in between the shops, and the Old City center where we visit markets and the Yu Gardens. We zigzag along bridges (which block the evil spirits—they can’t turn corners apparently) to old temples corralled by KFC and Dairy Queen and shadowed by modern skyscrapers. We pass lines of people buying moon cakes for the upcoming end of summer holiday.
The city—indeed, the country—is greener than you’d think. There are little parks everywhere. On the topic of green, while being vegetarian is a bit mind-blowing to the Chinese, there is a lot of talk of “green,” and you even find organics in the super market. As a recent New York Times article describes, “There is really no debate about climate change in China,” said Peggy Liu, chairwoman of the Joint U.S.-China Collaboration on Clean Energy, a nonprofit group working to accelerate the greening of China. “China’s leaders are mostly engineers and scientists, so they don’t waste time questioning scientific data.” The push for green in China, she added, “is a practical discussion on health and wealth. There is no need to emphasize future consequences when people already see, eat and breathe pollution every day.” While the US uses their inaction as an excuse not to act ourselves, they are laying out massive clean-tech plans. They will soon be the largest manufacturer of solar panels and wind turbines in the world, if they aren’t already. They are also one of the only sources of funding for large-scale clean projects, along with the Middle East. In conversation with clean-tech entrepreneurs, you learn that China is doing things in a year that take the US three. Wisely, they see the environmental situation as a chance to lead in a developing industry. At the World Economic Forum, many speakers from around the world praise China’s fast actions since Copenhagan on a variety of issues on climate change. However, to put the problem in perspective, if they hit all their goals for renewables their energy balance will shift from 91% fossil fuels to 86% fossil fuels by 2025—this if things go well.
They do face challenges—geography coupled with income inequality sets the stage for social unrest. There is a real estate bubble; the impact just depends on how large the bubble ends up being. I was in Dubai in the spring of 2008, and China doesn’t feel that way—that felt like a bubble, and everyone you met was there opportunistically. China feels different, but they have an incredibly delicate balance to maintain. While there were cranes everywhere, few were moving; it feels like they’ve hit the brakes. While the size of the economy may pass Japan’s this year, you have to keep in mind what this means per capita. It will be decades before income on a per-capita basis comes even close to that of developed countries. Pandora’s box is open, and there’s no turning back from a market economy in China. The trick is going to be in keeping it not too hot and not too cold—they need to be goldilocks. In a country of 1 billion people with soon to be the second largest economy in the world, small changes can have huge effects. Whether it be environmental or political issues, though, it’s naive to think they haven’t thought about all this. They have, and they have plans to address each in time, but these are hard problems.
If I had to sum up China in three words, they would be scale, which you can’t appreciate until you stand in it (the people, industry, construction, and buildings are vast, and the cities and people have hustle), dichotomous, as I imagine few places in the world are so many opposite things at once right now, and the future because it just feels like the future in so many ways, both good and bad. This is a country that engineered the weather for the Olympics. All in all, this is a deeply national, incredibly practical, and very ambitious country.
I leave slightly overwhelmed by the scale of it, depressed by the environmental effects of rapid industrialization, excited about a country run by engineers focused on data, disappointed in the lack of discourse here in the US on issues that seem so front and center to all of China, embarrassed by our infrastructure (not to mention political paralysis), but most of all, excited about the future. In a globalized and connected world, we’re more interdependent and alike than you think, and that’s a good thing.
A couple of weeks ago, I had the opportunity to spend the week with a group of Acumen Fund partners in Nairobi, Kenya. During the course of the week, we visited many of Acumen’s investments and met with their local team. I’ve been an investor and partner in Acumen Fund for over three years and recently joined their Advisory Council.
We cut through the dust, bouncing along on the copper earth on what Kenya calls a road. We are on our way to an ophthalmological outreach camp in Karatina, a couple hours north of Nairobi. The camp is run by Dr. Kibata, the founder of UHEAL. Dr. Kibata grew up on a small farm and watched his father go blind due to diabetic retinopathy. Diabetes is an enormous problem in parts of East Africa and India and untreated can lead to blindness. Dr. Kibata’s core clinic is located in Nairobi, but he has conducted a handful of outreach camps to reach patients in the rural areas. Today we are visiting one such camp. We pull up and find hundreds of patients waiting outside on plastic chairs to see the doctor. They’ve heard about the camp through word of mouth or radio advertisements and have come from the surrounding villages. Today he’ll see over 200 patients, about 10% of whom will need laser surgery to prevent blindness. The patients work their way through an eye exam (conducted in a dark room with sheets hanging on the windows to block out the sun), blood pressure measurement, and blood testing, and lastly they see the doctor. Dr. Kibata is the only doctor in the region who can perform these surgeries, and there is one functioning laser in the country. He operates on a cross-subsidy model where patients in Nairobi who can afford the surgery help underwrite the costs of the outreach camp in rural areas. With the work today, he’ll just break even. It’s early days, but there is a clear path for enormous impact. And soon, he’ll be able to help even more people as Acumen’s investment will help him purchase a laser and fit it into a van to create a mobile clinic for UHEAL.
In downtown Nairobi, we see a similar business model. David Kuria, the founder of Ecotact, a public sanitation company, shows us his Iko Toilet, a pay-for-use toilet. David, the designer and an architect by training, is addressing the dangerous lack of public sanitation in the slums of Kenya. Like Dr. Kibata, he relies on a cross-subsidy model where the downtown toilets in commercial districts help underwrite the cost of toilets in the slums. Ecotact has 26 toilets in operation with over 4 million uses last year, and customers pay 5 shillings (about 7 cents) per use. We visit a facility in the downtown business district, and business is booming. This unit leases out space to a small refreshment store and a shoeshine operation off the back. It’s a beautiful day, and there is a line for shoes to be shined. The toilet in the slum is less busy, but a steady stream of people flow through. It’s a hard problem—how do you convince someone to pay for something typically viewed as free (going to the bathroom) out of very limited income? David has a unique approach: make sanitation sexy. He’s had Miss Kenya, the vice president, and various other Kenyan celebrities visit his facilities. Still, it’s an uphill battle—the fact that the business even exists shines a light on the government’s inability to provide basic services, and David has to negotiate the land lease with the government each time he opens a new facility.
In Kibera, we meet other aspiring entrepreneurs. There is a youth group that has built a greenhouse on what was previously a trash pile; their tomatoes are just starting to sprout. And they’ve installed a pay-for-use toilet similar to Ecotact’s—success brings competition, after all. The youth group meets in a structure on the edge of a ravine where the railroad to Uganda comes through. Kibera sits on both sides of these tracks. The railroad technically owns 100 meters of land on each side and could reclaim it at anytime. We visit Hot Sun Films, a film school and production company in the middle of Kibera. Through the gate, crammed into a small room, we find iMacs and a group of young directors brimming with excitement. Their latest movie, Together Supreme, is being shown at the Vancouver International Film Festival. We leave as the prayer bells begin to ring, passing a bright red wall painted with Enjoy a Coca-Cola. It seems iMacs and Cokes are universal.
We find out at the airport that our flight to Kitale is a couple hours late, and we eventually leave at 2:30pm on our scheduled 11:30am flight, necessitating several calls to reschedule an entire afternoon of visits. On our way to western Kenya near the border of Uganda, the dual-prop plane sways with the currents as we climb. The landscape changes from dry arid plains to green rolling hills dotted with teepees of drying corn. It’s harvest time, and farmers are busy. As we pull off the airstrip, school kids are waiting in uniform. They come out to watch the one daily flight land. After lunch, we head off to see an agricultural finance organization that makes loans for agricultural assets.
The organization has over 8,000 members, over half of whom are women, and on our visit, we meet a community of borrowers. A small group has formed in order to get access to capital. A handful of members can have a loan out at any given time, and once it is repaid, other members request access. Loans are for a cow, a chicken coop, and the group asks about getting a loan for a milk chiller that they all could use collectively. The committee does the due diligence on each member, who first must be active in the group for a number of months, then raise a down payment, pass a house visit, and finally submit a formal project with detailed plans justifying the loan amount requested. The group is led by a 71-year-old woman as sharp as ever. If she was in charge of due diligence at the banks here, we wouldn’t have had a financial crisis. The group structure inherently creates accountability, and the loans go to assets (livestock and equipment) that pay real yields in the form of eggs and milk.
From there, we head off to visit test plots of hybrid seeds developed and distributed by Western Seed Company. The farmers walk us through various plots, past corn taller than we are, and we’re trailed by kids excited to get their pictures taken. Western Seed makes a variety of seeds that have been selected based on the high elevation and water traits unique to the area. The seeds are more productive, but convincing farmers to change is hard business. Most farmers here farm a half acre to a hectare in total, so over the course of a lifetime, a farmer may make only 40 choices on what to plant, and the resulting harvest determines not only financial success but whether the family will have enough food for the year. Innovation in agriculture inevitably takes a long time because the feedback cycle is often measured in years. We head back to Kitale, passing a flipped truck on the highway—the roads are probably the most dangerous part of the trip. After a fantastic dinner by candlelight (power is out in Kitale), we head back to the Kitale Club, which is a relic from the past. You can imagine some fine British chaps exchanging big-game stories sitting around the fire. You can golf the beautiful 9-hole golf course if you don’t mind the monkeys on the course or the occasional cow wandering through.
The next day, Saleem Esmail, the founder and CEO of Western Seed, leads us on a tour of the Western Seed facility. Saleem is a fifth-generation Kenyan, a Muslim, and from Southeast Asia. He’s an inspiring entrepreneur, and you just want to follow him no matter where it leads. The last couple years, demand has outpaced supply, and Saleem needs to increase productivity. With help from an Acumen investment, he’ll do this by purchasing and cultivating his own land to grow seeds that are then processed at his facility. His alternative to Acumen’s investment is a loan at 16% from a local bank that demands 200% collateral made up of both assets and guarantees from the board. You can see what patient capital really means with Saleem. It takes him on average 3 years to convert a customer from the competitor’s seeds, he has to plan 2-3 years in advance to ensure he has the proper stock ready, the weather is always unpredictable, farmers frequently do not have enough fertilizer, and he has limited access to financing. But Saleem has a plan, and he’s as sharp as any CEO you’ve met. He talks about the need to put cashflow to work (if you can’t, he says, you’re stagnant), about how critical good people are (his team is incredible, and morale is high in the plant), and how they work 24 hours a day in shifts if needed to address a problem. I’m always so impressed by farmers—the job requires them to be incredible business people.
We head back to Nariobi and, over the balance of the week, see variety of companies. There’s d.Light, founded by Sam Goldman and Ned Tozun, that produces solar lanterns to replace kerosene. They’ve sold 350,000 lanterns already throughout Africa, India, and Southeast Asia. Sam’s mission is to eradicate kerosene, which kills well over a million people in the developing world every year, from both fire and indoor pollution. We learn of a fire earlier in the year from a spilled kerosene lamp that killed several girls in Tanzania, and Sam’s motivation for starting the company came years ago when a friend of his was badly burned in a similar fire. In Tanzania, d.Light is getting traction through schools as students receive a $6 lantern to study with at night included in their school fees. The lamp runs on a 3w bulb, and newer versions have the ability to charge your cellphone. Often people have to travel 2 hours to charge their phones on car batteries, so this is a great improvement. Still, the cost is relatively high, and adoption is somewhat slow, but d.Light is making steady progress.
We visit the factories of Insta, a company with a license agreement to make a calorically dense and nutritionally rich nut-paste-based product for distribution through various aid agencies. The product is often prescribed as medicine to get HIV patients’ BMIs high enough to go on antivirals. Insta is the model globally and the leader in the space, but still the work is complicated. Payments are irregular and the reliability of supplies (peanuts, milk) volatile. Acumen recently provided working capital to move forward on a batch of the product. Still, despite the critical importance of the nutritional supplement to those most in need, hard work lies ahead.
We visit Botanical Extracts EPZ Limited (BEEPZ). From a locally grown plant, BEEPZ extracts artemisinin, which is then used in antimalaria medicine. Hailed by Thomas Friedman in the New York Times a number of years ago, the company has had a tough go. Pricing for the drugs has been volatile and extraction efficiency hard to achieve. BEEPZ is running a couple days a week now, producing in limited quantities.
We end the day on a positive note at a housing development built by Jamii Bora, a local microfinance bank with 170,000 members, making it the largest in Kenya. The development is part of a plan to provide housing and community to people currently living in the slums. A group of women greet us as we arrive, and after some singing and dancing (in which we are included), they show us their work. They’ve made literally millions of bricks and roof tiles for homes that will be constructed. We visit the local school, the well, the water-treatment ponds, the clinic, and their homes. The woman are so excited about and proud of the development, and it’s amazing to think how far they’ve come, from the slums we visited earlier in the week to two-bedroom houses with running water. People are moving in that day, and there’s a real sense of community that you can just feel.
I leave each business thinking just how complicated these problems are. They touch on behavioral economics, marketing, finance, public policy, ethics, technology, and education. The problems exist an environment with little physical infrastructure—poor roads constitute 40-50% of the cost to transport goods, and there are frequent power outages. The effects of climate change are being felt so directly that the conversation has shifted from mitigation to adaptation already. I worry about how little institutional and governmental support there is, thinking back to Dr. Kibata’s eye clinic, which, adding confusion to inefficiency, is regulated by the Ministry of Health and competes with organizations selling glasses, who are regulated by the Minister of Culture and Social Services, often with different plans and conflicting incentives. These businesses operate in a country with a life expectancy of 54.5 years. Each of these entrepreneurs is—and I say this intending only the highest praise—unreasonable, slightly crazy, and incredibly inspiring. It’s unreasonable people who create change. Whether it’s the 200 patients that UHEAL saw the day we were there, the 350,000 lanterns d.Light has sold, the 8,000 members of the agricultural finance organization, or the 1200 tons of seed Saleem will produce at Western Seed, each one is producing real, measurable change. While they all might not make it, there’s not one of them I wouldn’t be proud to be invested in.
This is what I love about Acumen—it backs local entrepreneurs to solve the hardest problems for the people most in need. If you can prove the model, the sector follows. There’s now $4 coming into these sectors for every $1 Acumen puts up. You realize that aid has become a business, and while intentions are good, there are vested interests and incumbents often all too concerned with protecting their own positions first and foremost. And in this well-intentioned world filled with white SUVs, Acumen gets dirty. Their people on the ground have a working relationship with each of their investments. These guys don’t presume to know the answers, but they know the process that leads to answers and the systems of accountability that increase the chances of success. The problems are complicated—if they were easy, they would have been solved a couple billion dollars ago—but Acumen is creating measurable, repeatable examples of success founded on the belief that people want dignity, not dependence.
If you will be in Chicago on November 13th, Chicago’s Acumen chapter will host Dignity, a photography exhibition and auction, in partnership with the Nuru Project. Full details can be found here—we’d love to have you.